Domestic auto sales post decadal high volume growth in FY23!

What's Buzzing 

Siam reported annual wholesale dispatches for the industry for FY23 wherein total domestic wholesales are seen touching 2.1 crore, up 20.4% YoY. Healthy double digit growth was witnessed across segments with exports coming a tad muted partially tracking global uncertainties and were down 15.2% YoY at 47.6 lakh (primary led by 2-W & 3-W space). 

Context 

Within segments, PV attained a new high domestically at 38.9 lakh units, up 26.7% YoY. The M&HCV space witnessed 34.4% YoY growth at 9.6 lakh units (M&HCV up ~49.2%; LCV up ~26.8%) and is well poised to attain a new high in FY24E (previous high of 10.1 lakh units in FY19). The 2-W space also witnessed a demand recovery with volumes up 16.9% YoY at 1.6 crore units. However, it is still well below the previous highs seen in FY19. On the 3-W front, the domestic market witnessed pent up demand with volumes rising 87% YoY to 4.9 lakh units. The tractor space also witnessed healthy ~12% YoY growth with domestic industry volumes pegged at ~9.4 lakh units in FY23. 

Our Perspective 

FY23 turned out to be one of the best years for the domestic automobile space in the recent past. Absolute industry growth of 20.4% on a YoY basis in FY23 is the highest in the past decade with 20%+ volume growth last seen in FY11. Notably, share of SUV has increased to 52% of domestic PV sales in FY23 vs. 49% in FY22 and ~28% in FY19. Also, share of scooters in overall mix improved and now forms 33% of overall 2-W sales vs. 30% a year prior. On the market share front, M&M and Tata Motors were key gainers in the PV space while Ashok Leyland and VECV (Eicher Motors) were key gainers in the CV space. In the 2-W pack, market leader Hero MotoCorp lost market share amid muted volume growth in the entry level motorcycle segment, which is more exposed to rural India while key gainers were TVS Motors as well as Royal Enfield. Going forward, we expect volume growth to taper for the domestic automobile space, albeit on a high base but continue to remain positive on the CV and PV space amid increased infra spends & underpenetrated car category in India, respectively. Key monitorables, going forward, would be price movement of key commodities that have started to inch up from their recent lows, technological transformation at the OEM level amid accelerated EV push and rainfall spread in the upcoming monsoon season 2023.